Download Practice and legislation of TP

Practice and legislation on
Transfer Pricing in Dominican
Republic
Wanda M. Montero
Oslo, Norway
Outline
0 Some Tourism Industry Facts
0 Some All Inclusive Hotels Facts
0 Legal Framework
0 Sector Audits Strategy
0 Tax Base
0 Procedure
0 Results
0 Future of Transfer Pricing
Source of Capital MNEs
16.8%
Panamá
13.5%
12.9%
12.8%
Estados Unidos
Islas Vírgenes Británicas
España
Paises Bajos
Reino Unido
México
Venezuela
Canadá
Suiza
Colombia
Francia
Islas Cayman
Alemania
Bahamas
Italia
Costa Rica
Dinamarca
Bermudas
4.5%
4.0%
3.3%
2.2%
1.9%
1.9%
1.9%
1.8%
1.7%
1.5%
1.3%
1.2%
1.1%
1.1%
1.0%
Sector
Audits
Tourism Industry Facts
0 Dominican Republic is the 4th Tourism exporter in
Latin America and the Caribbean (Surpassed by
Brazil, Mexico and Argentina)
0 The Foreign Direct Investment is around 1/4 of the
total FDI
0 As a percentage of the GDP, the tourism industry
represent about 10% of the GDP
Tourism Industry Facts
Tourism Value Added as a percentage of GDP
10.7
2007
10.1
2008
9.5
9.2
9.1
2009
2010
2011
All Inclusive Hotels Facts
0 93% of companies its capital comes from foreign
investments
0 Tax incentives regime (Import IVA, Local taxes, IVA, etc)
0 At least 80% of the hotel room are sell to a related party
located in a tax heaven.
0 The unit income (per room price) lower than the unit cost.
0 Per room rate lower than the one published in many booking
webpage and Tour Operator catalog.
All Inclusive Hotels: The Business
Legal Framework
• Arm’s Length Principle
2006
0 Faculty of the Tax
Administration
0 APA’s
0 Interest payed and cost
distributed between
related parties
2012
0 Related Party definition
0 Comparability Analysis
Criteria
0 Methods
0 Adjustment to comparable
transaction
0 APA
0 Safe Harbours
0 Documentation
0 Others
Sector Audit Strategy
Tax Base: based on the hotel rate at which the guest or
final consumer overseas pay per night;
Sector Audit Strategy
Procedure:
1. Find the Per night rate pay by tourist oversea, in a 7
nights packages, discounting the transportation.
2. The rates were segmented according to the
category of the hotel, location and season
0
0
0
5 categories were identified in each zone.
ASONAHORES submitted these categories.
2 Seasons were identified, high and low season.
3 different region, A, B, and C. A for the expensive
one, C for the cheapest.
Sector Audit Strategy
Procedure:
3. 10% of mandatory Tip and 16% of IVA was
discounted.
4. The margin of 20 and 25%, as a markup was
discounted. This margin is it supposed to be the
profit margin the tourism intermediaries get for the
commercialization service.
Sector Audit Strategy
Results:
Fiscal period audited
2005-2010
Audits by fiscal year
2005-2010
Tax Period
Quantity
2005
2006
1
1
2007
2008
16
3
2009
2010
32
20
Total
73
Audited Periods
1 period
2 periods
3 periods
4 periods
Total
Taxpayers
5
14
12
1
33
Sector Audits Strategy
Results:
Judgments from the Supreme Administrative Court,
sustains and confirms the action as legal and correct,
in both form and substance, and therefore, confirming
the amounts of the estimates contained in the
resolutions of determination of tax.
Future of TP
0 Around 70% of the audited hotels agreed to rectify their Tax
Returns for the period 2007-2010 and 2011 in few cases
0 Since last year, taxpayers began to submit their Transfer
Pricing documentation for the 2011 fiscal period.
0 Further Modifications were introduced to the Tax Law this
month, eliminating the Sector APA’s, instead were included
the unilateral and bilateral APA’s and Safe Harbours.